INR: Risk of USD/INR Downside Evident via Options, RBI Continue to Intervene

Bobl Block trade, suggest seller:

• OEZ5 ~3k at 117.89.

Gilts little changed, futures steady around 91.50.

• A bullish cycle remains in play. Initial resistance at 91.82. Initial support at 90.65.
• Yields within 0.5bp of yesterday’s close.
• Cross-market, gilts giveback some of yesterday’s outperformance vs. Bunds on the back of the firmer-than-expected quantity side of the labour market data.
• We don’t think this data will be gamechanger for the BoE, particularly with wage data slightly softer than expected at this early stage in the Q3 cycle (see our earlier run of post-data bullets for more colour).
• A reminder that we have CPI data tomorrow ahead of the BoE decision on Thursday.
• Our detailed CPI preview can be found here.
• Focus following Thursday’s BoE decision is likely to fall on the QT decision for 25/26, with consensus looking for no change in Bank Rate.
• There is plenty of uncertainty around the QT decision and given that the size of the balance sheet is to approach the top of the PMRR range through passive reduction alone, we would argue that either active sales continuing at their current pace or being suspended completely would be the optimal position for the market.
• Former MPC member Wadhwani suggested that the BoE should stop active gilt sales
• Analysts are split on whether there will be a skew away from long-dated gilts being sold.
• On the issuance front, the DMO will sell GBP3bln of the 4.375% Jan-40 gilt this morning.
• U.S. President Trump’s state visit is set to provide headlines over the next 48 hours, with U.S. firms outlining increased investment intentions re: the UK in recent days.

• MNI: ITALY AUG FINAL HICP 1.6% (VS 1.7% FLASH, 1.7% JUL)